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Your guess that somewhat is happening with the slope was a good one. The slope will indeed change. If you want to draw that new Demand line ($D_1$) it has to start at the exact same point of the old demand line (if wages are zero the percantage tax will be zero too). The correct intersection with the Y-Axis would be: $(1-t) W_0$ (this simply means one minus ...

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While many folks treat reductions in government revenue as equivalent to spending, they’re not actually the same thing. Tax cuts don’t “cost” anything. Tax cuts represent less money coming in, while government spending (such as repayment of student loans) represent more money going out. So your first thought when seeing the two things treated as if they were ...

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Value-Added Taxes (VAT) are supposed to capture most goods and services produced in the private sector, but there can be exceptions within a country’s laws. Even if the exceptions were eliminated, there are some non-market components to GDP that would be missed (e.g. imputed values, like the “rental value of owner-occupied housing”). (You need to go into ...

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In the long run there would be no difference as income will always eventually equal consumption so in the long run, flat 30% VAT tax would be equal to flat 30% Income tax. This is so because income can be only consumed or saved but saving is just deferred consumption. Assuming away some dynamic changes in taxation in future it does not make any difference ...

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If the government taxes people but does not spend the money, accumulating surplus, it will decrease aggregate demand. Aggregate demand depends on consumption, which depends on disposable income and taxes reduce disposable income. A decrease in aggregate demand will decrease the price level, reducing inflation or causing deflation, if nothing else happens (...

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I think you are making it unnecessarily hard for yourself. You can calculate the deadweight loss (DWL) simply as the difference between consumer surplus pre-tax and post tax, and also by adding tax revenue as it is not necessarily wasted if government uses it, so that would be: DWL = \frac{(A−ap)^2}{2a} - \frac{(A−a(p+t))^2}{2a} +t(A-a(p+t))= A t - \frac{...

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I sell digital books, and will discuss their particular situation. I do not know whether what I describe applies elsewhere. I and have read a fair amount of discussions about how to price books. To what extent academic research would be referred to, it’s wherever marketing research ends up (business journals?), and not straight economic models. The first ...

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Well you actually answered this question yourself. It is because of this: While I do understand, that the government loses money in tax incomes, I don't understand how this directly increases the tax burden on other tax payers (except for, in the long term, the government might raise taxes to make up for lost tax revenues). To be more precise an ...

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I don't know whether you'll count this as an economic argument, but it's about the role of competition in the allocation of scarce resources, so I think you should: Suppose that some disease emerges that disproportionately affects the members of some ethnic group, or is concentrated in some geographic area, or is concentrated in some population that is ...

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Services are just as much VATable supplies as pyhsical products are It is a mistake to think of the increase in price along the supply chain as just each person wanting their cut. For them to achieve this they need to be increasing the value that can be delivered to end customers, even if - for example - it is simply bringing a pallet of product to a ...

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At the time of writing, the question is far too long. From a simplified accounting perspective: The government fiscal deficit = all expenditures - taxes. The change in debt in a year is equal to the fiscal deficit (under simplifying assumptions). So if the government can raise taxes without affecting anything else, the deficit becomes smaller, or turns ...

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